What resilience has to do with the future and strategy

About «Black Swan Events» and the unpredictable

I recently wrote a post on the topic of «Black Swan Events» and gave tips on how to prepare for the unpredictable. The reactions motivated me to expand on that and dedicate today's blog to the topic of resilience. What is resilience actually, why is it suddenly so important? What does it have to do with future readiness and how do we best deal with it in strategic planning? That's what this blog article is about.

What resilience means in the business context

Resilience in general is defined by the German Duden and the English Oxford Dictionary as

  • the «ability to withstand difficult life situations without sustained impairment, or to recover quickly after such situations».

Business resilience is defined by ISO standard 22316:2017 as

  • the «ability of an organization to absorb and adapt to a changing environment in order to achieve its goals, survive and prosper». 

It seems important to me to note here that business resilience goes further than the operational continuation of the business, which is referred to as business continuity management and defined in ISO Standard 22300:2018 as.

  • The «ability of an organization to continue delivery of products or services at an acceptable, predefined level after a disruption».

Resilience in an enterprise context is strategic in nature and takes a holistic approach by incorporating leadership principles, governance structures, investment and resource planning, as well as risk management and operational business continuity management with the appropriate contingency plans.

Kofi Annan and why we struggle with resilience

Since the COVID pandemic, the topic has been booming and is on everyone's lips. Why wasn't this the case earlier, why did it take COVID to give resilience the status it deserved decades ago in our VUCA world? There is a wonderful quote by Kofi Annan, Nobel Peace Prize winner and former UN Secretary General (1997-2006), which answers this question succinctly and to the point:

«It is not easy to build a culture of prevention. While the costs of prevention must be paid in the present, its benefits are in the distant future. Besides, the benefits are intangible; it's the disasters that did NOT happen.»

This quote expresses very nicely why short-term, «return on investment-driven» leadership likes to neglect the issue and why the widespread pandemic suddenly allows the issue to gain the prominence it has always deserved.

What does Futures Studies tell us?

Futures Studies divides the future into three areas based on their probability of occurrence, which defined by the Copenhagen Institute for Futures Studies are the following:

  • Megatrends, probability of occurrence 100%: Megatrends are the real drivers of change. They are development paths that shape both the present and the future, and for the most part maintain their course even in turbulent times. We can use megatrends as a long-term guide. They are global in scope, but their impact varies locally. Megatrends are expected developments, but their development is seldom linear.
  • Uncertainties, probability of occurrence 50%: Uncertainties differ from trends in the sense that we are uncertain about the future direction, strength, and/or frequency. Therefore, we should be able to identify two extreme but plausible outcomes - i.e., polarities - by describing alternative ways in which an issue might develop. Uncertainties are classified as critical when they are judged to be bothersome.
  • Wild Cards or «Black Swan Events», probability of occurrence <10%: These are events or developments with low probability but large impact if they occur. Pandemics and financial crises are two classic wild cards because they are constantly looming and known dangers. We never know when they will occur, but we do know that their impact is massive and unpredictable.

There are, on the one hand, megatrends and developments that are considered certain, want to be shaped and can therefore be planned. On the other hand, there are wild cards: events which, considered individually, are rather unlikely, but in the sum of all possible and impossible «Black Swan Events», individual ones occur again and again. Even though they cannot be planned, history teaches us that it is negligent to simply ignore them. We must prepare for them and protect organizations for the eventuality. In between, there are the uncertainties, the «either-or-developments», where we cannot assess whether they will go in one or in the other direction, even after consulting with experts.

A note: While megatrends are about shaping and doing, «Black Swan Events» are about preventing and preparing to potential threats. It is actually a matter of survival. At the same time, there are also positive wild cards: I recall, for example, the fall of the Berlin Wall and the Iron Curtain in 1989.

Here comes my best practice suggestion

First, a personal experience: From 2021, I was part of a start-up in which three of us in the management team built up a business in Ukraine. This involved leadership and, among other things, its education. Towards the end of the year, the saber rattling on the Russian-Ukrainian border became visibly louder. It felt like we were working under a sword of Damocles that could fall at any moment. Practically until February 24, when the sword of Damocles actually fell, the absolute majority of experts believed that an invasion of Ukraine by the Russian army was rather unlikely. Since then, many experts have suddenly explained to us why this happened, and quite a few say that it was very predictable. Even in retrospect, it seems right and important to me that one should not simply stop pursuing one's strategy because of a potentially looming «Black Swan Event». One will always know better only in hindsight. The many potential «Black Swan Events» that do not occur are not discussed later. That is why it is clear to me that we need both: a strategy for how we want to shape the future and resilience planning so that we are prepared in the event of a «Black Swan Event». If one of the two is missing, we are not future-ready.    

The following keywords to assess the baseline situation

  • VUCA world: We live in a world that is volatile, uncertain, complex and ambiguous.
  • Digitization: It holds enormous potential, but it also increases vulnerability.
  • Agility: Organizations must be able to adapt and change faster than ever.
  • possibilities: Never before have there been so many, never before has the world changed faster.
  • Black Swan Events: They increase - financial crises! Pandemics! Wars! Energy crises? ...
  • ...

This short list shows that the topic of resilience has become too big and too important to be dealt with as part of strategy development. First, it would not receive enough attention and accountability, and second, I believe that strategy development and resilience planning need different groups with different participants and competencies.

My best practice proposal therefore consists of three points:

  1. Strategic Foresight: In view of the challenges listed, it almost seems paradoxical to build a strategy and plan all the resources based on it on a single scenario. It is high time that companies systematically deal with the future, consider different scenarios, free themselves from the constant adaptation mode and shape the future. Strategic Foresight is the tool for this. It is the key to future readiness and makes it possible to develop a future-ready strategy rather than a conventional one. In our disruptive world, Strategic Foresight must become mainstream and, much like the decades-old SWOT, be done before strategy development. And when doing so, it is important that the team developing the strategy is also part of the Strategic Foresight process.
  2. Strategy development and implementation: This is the step to follow and here (good) processes usually exist. Companies either use tools like OKR (Objectives and Key-Results), BSC (Balanced Score Cards) or have found their own way. It is essential that the strategy elements identified in strategic foresight actually flow into the strategy, not only in its business planning, but also in its implementation and reporting.
  3. Resilience planning: This should be an independent process under the leadership of risk management. Ideally, the C-Level risk manager who was involved in the strategic foresight and strategy development should steer this process and take responsibility for resilience planning. Best practice is to use the competencies represented in the strategic foresight and as a part of the process brainstorm which possible and impossible «Black Swan Events» are conceivable, and incorporate the resulting list as input into resilience planning.

To the final point

  1. The world offers too many opportunities not to address them with a future-ready strategy.
  2. At the same time, the future has become so complex that companies without strategic foresight can no longer shape it by themselves but only follow its developments.
  3. History, in turn, teaches us that it is neither responsible nor sustainable not to give resilience the importance it deserves and to treat it stepmotherly as a secondary process in strategy development.

How does it look in your company? Are all three areas covered and is your company fit for the future? If not, where is the shoe pinching? I am interested in your feedback, be it as a comment, with a networking on LinkedIn or during a complimentary discovery talk

PS Let the future be your guide - the best in life is yet to come.